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Q&A #65 – Is it legal to implement a “use it or lose it” annual PTO policy?
Whether an organization is allowed to implement a “use it or lose it” policy for annual paid time off (PTO), under which employees would forfeit unused PTO by the end of each year, depends on the state laws applicable to where the employees work. This can be a difficult question with respect to PTO policies that combine vacation and sick leave, as some states have different rules for each type of leave. In general, it is usually permissible to have a limit on the carryover of unused leave or a cap on maximum leave accrual, but it is important to think through the details and carefully review the laws of all applicable states.
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Apply Phase-In Strategies to Triumph Over Uncertainty and Gain Acceptance [SUBSCRIBERS-ONLY]
There has been and will continue to be a lot of uncertainty in the world, most of which is outside of our control. For example, economic, safety, and health factors have been key sources of uncertainty recently, followed closely by people’s comfort levels, trust, and confidence. Applying a phase-in strategy when implementing new changes during periods of high uncertainty will tilt the success factors in your direction.
Q&A #64 – Is it appropriate to take an official action in executive session?
Whether it is appropriate to take an official action during executive session depends on what your organization and Board understands executive session to mean. “Executive session” generally refers to a private meeting of the Board (and perhaps select other invitees), which is intended to provide a space where Board members can hold candid discussions on sensitive or confidential matters. Executive session is a useful and appropriate format for some issues, but it is important to be clear about whether executive session is intended to be “off the record,” as official Board actions must ultimately be documented in the meeting minutes.
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Why Actual Timekeeping is Better Than Estimated Labor Allocations [SUBSCRIBERS-ONLY]
Labor is the largest and most precious resource for nonprofit organizations. Managing labor and directing how this valuable resource will be used are the bases for the most critical management decisions. However, too often nonprofits default to using estimated labor allocations, which is a disservice and often yields misleading results. Using actual contemporaneous timekeeping is the best method to track labor hours and observe and manage the impact that labor has on operations, resources, and financial health.
Q&A #63 – Are grants from foreign charities subject to the 2% limit when calculating public support on the Form 990, Schedule A?
This is a common question that has lacked a clear answer for a very long time. Most practitioners have concluded that grants from foreign charities meeting certain requirements should qualify to be counted in full for public support test purposes, and not subject to the 2% limitation, However, there is some risk that the IRS could disagree with this position.
When Designing an RFP for Audit Services, Think Good First Impressions and Efficiency
Think of your request for proposal (RFP) for audit services as your initial introduction and handshake. Your goal is to make a good first impression to the prospective audit firm. You want to convey a message that is positive, thoughtful, and efficient. If you can demonstrate that your organization will be the smoothest audit on the planet, the organization will be more likely to attract high quality audit firms to submit a proposal and obtain lower fee estimates.
Q&A #62 – Are Board members allowed to pursue funding opportunities for other organizations?
This question raises difficult issues under the “corporate opportunity doctrine,” which is rooted in the fiduciary duty of loyalty. Under the corporate opportunity doctrine, a corporation’s Board members must avoid diverting to themselves opportunities which in fairness ought to belong to the corporation (such as leasing or purchase of property, funding opportunities, mission-based activities, or other business opportunities that could be advantageous the organization).
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Finance Committee Orientation Meetings are Worth the Effort [SUBSCRIBERS-ONLY]
Is having regular finance committee orientation meetings value-added? The answer is a “Strong Yes.” If you are thoughtful with planning and execution of the finance committee orientation meeting, the answer will be an “Amazing Yes.” The return on time and effort here will pay many dividends.
Q&A #61 – Are Board members allowed to vote by email?
This question raises two distinct, but related, issues: whether the Board can take action by written consent in lieu of a meeting, and if so, whether this written consent can be provided by email. The answers are determined by your organization’s governing documents and the applicable state nonprofit corporation statute. Most states allow nonprofit Boards of Directors to take action by written consent in lieu of a meeting if 100% of the Board members approve the proposed action in writing, so long as this is not prohibited by the organization’s Articles of Incorporation or Bylaws. The question of whether this can be accomplished by email is often a more difficult one.
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Managing Current and Future Impacts of Deferred Income [SUBSCRIBERS-ONLY]
Paying closer attention to deferred income performance is a must. Monitoring trends and actively managing deferred income will optimize current and future management of this valuable resource. The best approach is to view deferred income as both a current period key performance indicator (KPI) and a resource to support future activities.
Q&A #60 – When are pledges enforceable?
This answer to this complicated question depends largely on the applicable state law, as courts in different states have somewhat different approaches to the issue. Most courts have taken a favorable view of the enforceability of pledges, holding donors liable for pledges on the basis of public policy or various traditional contract law principles. However, nonprofit organizations are well-advised to bolster the enforceability of pledges through carefully drafted written agreements.
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How to Get the Most Out of Audit Firm Interviews [SUBSCRIBERS-ONLY]
You have done everything right, prepared a request for proposal (RFP), obtained a list of prospective audit firms, received proposals from the audit firms, and narrowed your choice down to the top three to conduct live interviews. Now the most important step: how to conduct successful interviews to help ensure the “best” selection is made.
Q&A #59 – What policies are recommended for a newly formed nonprofit?
For new nonprofit organizations, Part VI, Section B on page 6 of the Form 990 is a good starting point to look for basic guidance related to which governing policies should be adopted in the organization’s early start-up phase. While some of these policies may not be relevant, most new organizations should start, at a minimum, with a conflict of interest policy, whistleblower policy, and document retention and destruction policy. Additionally, I recommend that new organizations consider adopting a code of ethics policy.
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Using Banking Professionals as Trusted Business Advisors [SUBSCRIBERS-ONLY]
When assembling a team of trusted business advisors (“TBAs”), banking professionals should be at the top of your list. By the nature of their work, banking professionals interact with many different types of clients that are experiencing an ever-changing variety of different challenges. Thus, banking professionals generally bring value-added perspectives, opinions, and experiences that make them an important part of any team of TBAs.
Q&A #58 – Are amendments to a nonprofit organization’s Bylaws required to be filed with the government?
A nonprofit organization is not required to file Bylaws amendments with the state or federal government in order for the amendments to go into effect. This treatment is different than amendments to the Articles of Incorporation, which are not considered official until submitted and approved by the state government.